ECB & The Failed QE Stimulus…”The central banks are simply trapped.”
by Martin Armstrong
ArmstrongEconomics.com
December 1, 2015
The central banks are simply trapped. They have bought in bonds under the theory that this will stimulate the economy by injecting cash. But there are several problems with this entire concept. This is an elitist view to say the least for the money injected does not stimulate the economy for it never reaches the consumer. This attempt to stimulate by increasing the money supply assumes that it does not matter who has the money. If we are looking only at the institutional level, then this will not contribute to DEMAND inflation only ASSET inflation by causing share markets to rise in proportion to the decline in currency value.
The European Central Bank (ECB) then pushes interest rates negative to punish savers and consumers for not spending money that never reaches their pocket. Negative rates promotes hoarding cash outside of banks which in turn then inspires the brilliant idea of eliminating cash to force the objective and end hoarding. But negative rates have been simply a tax on money. The attempt to “manage” the economy from a macro level without considering the capital flow within the system is leading to disaster.
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